800 presubscription charges come under attack

Since the passage last summer of the FTC and FCC rules targeted at 900-number pay-per-call services, many companies have turned to the use of 800 presubscription service as an alternative. Now the future of 800 presubscription service appears to be in serious jeopardy as both the government and the telephone companies are pushing for stricter regulation.

The existing federal laws governing the use of 800 numbers for pay-per-call information services were included as part of the FCC and FTC rules promulgated pursuant to the provision of the 1992 Telephone Disclosure and Dispute Resolution Act (TDDRA). Under TDDRA, and the FTC and FCC rules promulgated pursuant thereto, it is generally unlawful to charge an 800-number caller for information services unless the caller has first asked to receive the service through a "presubscription" or comparable arrangement. Despite strong objections from the state attorneys general, neither the FTC nor the FCC required that the presubscription agreement be in writing.

The rules provide that a valid presubscription arrangement may be created if all four of the following conditions exist:

* The service provider clearly and conspicuously discloses to the consumer all material terms and conditions associated with the use of the service, including the service provider's name and address, a business telephone number which the consumer may use to obtain additional information or to register a complaint, and the rates for the service;

* The service provider agrees to notify the consumer of any future rate changes;

* The consumer agrees to utilize the service on the terms and conditions disclosed by the service provider;

* The service provider requires the use of an identification number or other means to prevent unauthorized access to the service by nonsubscribers.

Service providers utilizing 800 presubscription services have taken advantage of this exemption by establishing the presubscription arrangement with the caller on-line. The charges are then billed to the phone number from which the call has been made based on a reading of the automatic number identification (ANI).

The problem has been that the information provider has no way of verifying that the person making the call is, in fact, the party responsible for charges to that telephone number. The FCC has reported more than 2,000 complaints in just the first six months of the year. In many instances, the caller who may have agreed to the charge wasn't the one who received the bill. Rather, the home or establishment from which the call was made got stuck with the charges. Unlike 900 numbers, 800 numbers can't be blocked so there is no safety net for parents whose children might make calls without permission.

In early June, many telephone companies aware of the growing number of consumer complaints announced that they would no longer bill for 800 service.

In July, New York State Attorney General G. Oliver Koppell brought suit against three companies based on their use of 800 presubscription service.

Now, the FCC has proposed new regulations that toughen the requirements for billing 800 charges under the proposed rules. The information provider must obtain a written agreement from the individual who is responsible for telephone charges billed to the telephone number to which the charges will be billed. Under the proposed rules, the local telephone companies must make sure that a written agreement exists before issuing a telephone bill that contains charges for presubscribed information services. The proposed rules also state that a presubscription agreement may be established only with a legally competent individual.

The FCC's plan would also require the local phone company to break out charges for these calls just as it now does for 900 calls, and to list the name, address and number of the information service provider, the type of service offered and the date, time and duration of the call.

The FCC's proposed rules are subject to public comment, but industry sources believe that given the growing concern over abuses in this area, any weakening of the FCC's proposed plan is unlikely.

On the legislative side, Congressman Burt Gordon of Tennessee, the pioneer of the 900-number legislation, has proposed a complete ban on charging for 800-number calls, irrespective of whether a presubscription arrangement exists. It remains to be seen whether Congressman Gordon's efforts will be preempted by the FCC's action. Watch this column for further updates.

Linda Goldstein is a partner in the New York office of Hall, Dickler, Kent, Friedman & Wood, a law firm specializing in advertising and marketing law, with particular expertise in direct marketing and telemarketing.

Copyright Technology Marketing Corporation Oct 1994
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